CLIMATE CHANGE IMPACTS ON GLOBAL CEREAL PRICES
Several modeling groups have analyzed future changes in global cereal markets in response to climate change. All operate by making estimates of yield responses in each region, and then inputting these into a model of global trade that computes the optimal mix of crop areas in different regions and the market-clearing price. Five models summarized by the recent IPCC report suggests small price changes for warming up to 2.5ºC, and a nonlinear increase in prices thereafter (Easterling et al., 2007). Two important caveats relate to these estimates, however.
First, the yield changes used in these models usually assume considerable levels of farm-level adaptations, which substantially reduce impacts. For example, in one prominent study cereal prices rose by 150% for a 5.2ºC global mean temperature rise if farm-level adaptations were not included. When changes in planting dates, cultivar choices, irrigation practices, and fertilizer rates were simulated, these price changes were reduced to roughly 40% (Rosenzweig and Parry, 1994). Other studies often do not estimate impacts without adaptation, making it difficult to gauge assumptions. The costs of adaptation are also not considered in these studies, or reflected in price changes.
Second, most assessments have not adequately quantified sources of uncertainty. Although different climate scenarios are often tested, processes related to crop yield changes and economic adjustments are often implicitly assumed to be perfectly known. An additional source of uncertainty is potential competition with bio-energy crops for suitable land, which could limit the ability of croplands to expand in temperate regions as simulated by most trade models.m